Problem debugging website (mscorlib.dll error)

I'm running a ASP.NET 2003 app that's just started giving me grief for no known reason. The main error message is this:

"BC31011: Unable to load referenced library 'C:\WINDOWS\system32\mscorlib.dll': Version 2.0 is not a compatible version."

Its quite difficult tracking down a resolution as not many people seem to have this exact problem. I am running VS .NET 2005 side by side with the 2003 install, but that's not the issue as they had been playing nice for a good 18 months up until now. Compilation
is fine, the error only occurs if i try to debug the website or access it directly through IE or Firefox. If anyone has any ideas as to why this is happening, i'd be greatful. Look below for the full error message.

Compilation Error
Description: An error occurred during the compilation of a resource required to service this request. Please review the following specific error details and modify your source code appropriately.

Line 1: '------------------------------------------------------------------------------
Line 2: ' <autogenerated>
Line 3: ' This code was generated by a tool.
Line 4: ' Runtime Version: 1.1.4322.2032
Line 5: '
Line 6: ' Changes to this file may cause incorrect behavior and will be lost if
Line 7: ' the code is regenerated.
Line 8: ' </autogenerated>
Line 9: '------------------------------------------------------------------------------
Line 10:
Line 11: Option Strict Off
Line 12: Option Explicit On
Line 13:
Line 14: Imports Microsoft.VisualBasic
Line 15: Imports System
Line 16: Imports System.Collections
Line 17: Imports System.Collections.Specialized
Line 18: Imports System.Configuration
Line 19: Imports System.Text
Line 20: Imports System.Text.RegularExpressions
Line 21: Imports System.Web
Line 22: Imports System.Web.Caching
Line 23: Imports System.Web.Security
Line 24: Imports System.Web.SessionState
Line 25: Imports System.Web.UI
Line 26: Imports System.Web.UI.HtmlControls
Line 27: Imports System.Web.UI.WebControls
Line 28:
Line 29: Namespace ASP
Line 30:
Line 31: <System.Runtime.CompilerServices.CompilerGlobalScopeAttribute()> _
Line 32: Public Class Global_asax
Line 33: Inherits Rainbow.Global
Line 34:
Line 35: Private Shared __initialized As Boolean = false
Line 36:
Line 37: Public Sub New()
Line 38: MyBase.New
Line 39: If (ASP.Global_asax.__initialized = false) Then
Line 40: ASP.Global_asax.__initialized = true
Line 41: End If
Line 42: End Sub
Line 43: End Class
Line 44: End Namespace
Line 45: